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National Express Group PLC's (LON:NEX) announced its latest earnings update in March 2019, which signalled that the business benefited from a slight tailwind, eventuating to a single-digit earnings growth of 8.5%. Below is my commentary, albeit very simple and high-level, on how market analysts view National Express Group's earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts' expectations for this coming year seems optimistic, with earnings increasing by a robust 17%. This growth seems to continue into the following year with rates reaching double digit 26% compared to today’s earnings, and finally hitting UK£178m by 2022.
While it’s informative understanding the growth rate each year relative to today’s level, it may be more insightful to estimate the rate at which the earnings are growing every year, on average. The pro of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of National Express Group's earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I've inserted a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 8.6%. This means, we can expect National Express Group will grow its earnings by 8.6% every year for the next few years.
For National Express Group, I've put together three pertinent factors you should look at:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is NEX worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether NEX is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of NEX? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.